Humana is second major Medicare Advantage insurer to report high utilization

Photo: Raymond Gehman/Getty Images

Humana, one of the two biggest players in the Medicare Advantage market, is being hit with high benefit expenses due to high utilization among its members, according to a June 16 filing with the Securities and Exchange Commission.

Humana reaffirmed its full-year insurance segment benefit expense ratio guidance of 86.3% to 87.3%, and expects to be at the top end of this full-year range. 

"This expectation is primarily driven by the emergence of higher than anticipated non-inpatient utilization trends, predominantly in the categories of emergency room, outpatient surgeries, and dental services, as well as inpatient trends that have been stronger than anticipated in recent weeks, diverging from historical seasonality patterns," Humana said in the SEC filing. 

"As a reminder, the company's consolidated benefit expense ratio is expected to be approximately 40 to 50 basis points lower than the Insurance segment benefit expense ratio in each period due to intercompany eliminations," Humana said.

Adding to utilization trends is strong Medicare Advantage membership growth during the open enrollment period, which included a higher-than-expected proportion of age-ins. They tend to run a higher benefit expense ratio than the average new member, Humana said. 

"As previously disclosed, on average, new members take approximately three years to achieve mature profitability levels," the company said.

WHY THIS MATTERS

Humana said it assumes that it would continue to experience moderately higher-than-expected trends for the remainder of the year, which will be offset by a variety of factors, including higher-than-expected favorable prior year development, additional administrative expense reductions, higher than previously anticipated investment income and other business outperformance.

Humana and UnitedHealthcare together account for 46% of all Medicare Advantage enrollees nationwide, according to KFF.

Bids for 2024 were due last week.

UnitedHealth has also reported high utilization rates that it said will affect medical care cost ratios.

"Everyone knows that it was a bit of a challenge in terms of the rate environment this year," said Tim Noel, CEO of UnitedHealthcare Medicare and Retirement. Noel made his remarks during the Goldman Sachs 44th Annual Global Healthcare Conference last week that he attended with UnitedHealth Group CFO John Rex and Dr. Patrick Conway, CEO of Care Solutions, Optum.

"In 2024 bids we may see a little bit of pressure on benefits across the board inside the industry," Noel said. "When we see that, there tends to be growth not as strong as what has occurred in past years, but we still believe over the long term we'll see growth rate we've been accustomed to historically in Medicare Advantage."  

THE LARGER TREND

Pent-up demand following the COVID-19 pandemic is believed to be fueling increased utilization of services and procedures.

 In nearly a third of counties, Humana and UnitedHealthcare account for at least 75% of Medicare Advantage enrollment, according to the KFF report.

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org